Amazon broke lots of cities’ hearts in November, when it chose New York’s Long Island City and Arlington, Virginia, as the homes for its new headquarter locations after a yearlong search. After all, winners stood to benefit from tens of thousands of jobs and billions of dollars in economic investment.
Some of those snubbed cities may be holding out hope for a second chance if the e-commerce giant changes its mind about not reopening the search process now that it has backed out of its decision to move to New York City over local protests. But perhaps it’s time for cities to realize that preparations for the HQ2 contest may benefit them regardless of whether they are home to Amazon headquarters.
A recent report by the Morningstar ratings agency took a look at Charlotte, North Carolina, along with Houston and Salt Lake City, none of which made Amazon’s 20-city shortlist for HQ2 but are nonetheless growing their economies. CrediFi has examined those findings and analyzed how robust the commercial real estate finance market is in each of those markets. Here’s what we found:
Though Amazon reportedly said it liked Charlotte’s business climate, airport, fast-growing millennial population and public transportation infrastructure, the North Carolina city didn’t make the shortlist in part due to its relatively small pool of tech workers.
“While Charlotte didn’t make the final cut for Amazon’s HQ2, the city has a lot to offer with other interested companies, and its job market and population are on the rise,” Morningstar wrote in its report, noting that Charlotte is one of the cities showing the most growth in the country, based on population and jobs created.
A CrediFi analysis of commercial real estate financing nationwide shows that the Charlotte metro’s recovery from the global financial crisis was faster than for the country as a whole ‒ receiving five times more commercial real estate financing than the national average in the immediate aftermath of the crisis, from 2010-2013.
However, that growth has slowed.
While there was still above-average commercial real estate financing for Charlotte-area properties from 2012-2017, it was 1.3 times larger in that period, while growth in the number of CRE loans originated in the Charlotte metro in those five years was on par with average growth nationwide.
Over the past two years, the number of loans originated for the Charlotte metro’s hospitality segment dropped more than for other major property types.
Even if growth is starting to flatten by some metrics, however, young professionals continue to be attracted to Charlotte by its affordable cost of living and thriving job market, where the employment rate has been nearly twice as high as the national average over the past five years, Morningstar found.
Corporations are drawn to the city as well. Last year accounting giant EY, formerly Ernst & Young, announced a plan to invest $8.2 million in Charlotte and create 375 jobs there over five years, in part through creation of a new innovation center. Also in 2018, Yokohama Tire Corp. opened a 25,000-square-foot R&D facility 20 miles north of Charlotte, and Fortune 100 conglomerate Honeywell announced plans to relocate its global headquarters to Charlotte.
And just because Charlotte won’t be home to HQ2 doesn’t mean Amazon is done with the city.
The city council approved $13.4 million in road infrastructure and a land sale in preparation for an Amazon distribution center near Charlotte Douglas International Airport in June, and construction permits were issued later in the year. The facility will be Amazon’s largest distribution center in the Charlotte area and is expected to provide an estimated 1,500 jobs, the Charlotte Business Journal reported, adding that the project involves $200 million in investment.
Despite offering some $268 million in cash and tax incentives and proposing three potential headquarters sites, Morningstar noted, Houston failed to make Amazon’s shortlist even as other Texas cities, namely Dallas and Austin, did. As was the case with Charlotte, the decision was likely influenced by the lack of a strong tech culture in the city.
Even without HQ2, Amazon has made itself at home in Houston, completing an 800,000-square-foot distribution facility in 2017 and a 1 million-square-foot center last year.
That may well be what prompted the increase CrediFi found in industrial lending activity in Houston over the past two years. However, lending activity in the multifamily, office and retail segments has declined in Houston in the same period.
Houston, a long-time energy center, is in the process of transitioning to become more of a tech hub through an Innovation Corridor anchored by physical structures that represent Houston’s past but are being retooled to push the city into the future. The properties include the 1939 Sears department store at 4201 Main, which closed early last year; the former Exxon Mobil building at 800 Bell; and the former KBR complex on the East End.
“Houston’s chronic shortcomings as a tech hub may have torpedoed its bid for Amazon’s sprawling second headquarters, but the proposal has already served as a catalyst for developing an innovation district that officials say could at last entice the world’s most disruptive companies to locate in a city that has for years been playing catchup,” the Houston Chronicle reported last year.
Salt Lake City
Salt Lake City is “a fast-growing technology center because of its talented local workforce and positive business climate,” Morningstar said in its report. So why didn’t the capital of Utah make the Amazon cut? The ratings agency said the city is too small, too close to Amazon’s existing headquarters in Seattle, and lacks the depth of talent Amazon needs.
Yet Salt Lake City, too, is now home to an Amazon fulfillment center, a $250 million, 800,000-square-foot facility with some 1,500 employees. The Amazon fulfillment center, which opened in September, is the first one for Utah.
As in Houston, lending activity in the industrial segment increased over the past two years in Salt Lake City.
A CrediFi analysis showed that Salt Lake City was one of the midsize metros with the greatest growth in CRE lending activity over the past two years, driven largely by a rise in multifamily and industrial lending.
“Even without winning the Amazon headquarters, the city has been growing quickly,” said Morningstar, which noted that Salt Lake City’s mix of outdoor recreational activities and technical talent has earned it the nickname Silicon Slopes.
Globe St. has dubbed Salt Lake City “the newest tech hub,” citing the presence of global tech companies such as Adobe and Microsoft, which have offices in the Utah capital. In the state as a whole, tech companies supported more than one in seven Utah jobs and over one-sixth of the state GDP, the Kem C. Gardner Policy Institute found in a report released this month.
Amazon may not have selected Charlotte, Houston or Salt Lake City, but the process of putting forth their candidacy may already be bearing fruit.
“By courting Amazon, all three cities have been able to examine their strengths and weaknesses,” Morningstar found in its report, “and can learn from Amazon’s feedback when the next big corporation comes along.”